Is The Auto Industry Slowing Down?

In the first three quarters of Financial Year 2012 the auto industry has witnessed a slowdown in terms of the overall growth rate, however the outlook for FY 2013 looks positive and has the potential to swing the industry back into gear

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Judging by the performance of the industry based upon the first three quarters of FY2012, there is enough evidence pointing towards a downturn. The cumulative production data shows a growth of only 2.16 per cent over the same period last year. Possibly the only reason that can be attributed for a positive growth despite the adverse conditions in the market is the frequency of product launches. If manufacturers were to slow down on that front, there is a very high chance that the industry would eventually plummet to post a negative growth rate.

In terms of domestic sales, the industry recorded a growth of 4.57 per cent over the same period last year. While the Passenger vehicle segment posted a growth rate of 8.37 per cent during the same period, at face value, that sounds decent, however the segment-wise performance illustrates a clearer picture of the present condition of the passenger vehicle industry. Overall sales of cars in the domestic market have declined by -0.33 per cent, Utility Vehicles grew by 59.10 per cent and Vans grew by 3.71 per cent in the first three quarters of FY 2012 as compared to the same period last year. No doubt, we are also witnessing a change in buyer behaviour and that can be attributed to the figures as seen above.

With more takers for MPV/MUV/SUVs and manufacturers rushing to offer more products in this category, the era of the small car might be slowing down, however the practical UV segment has the potential to keep the auto industry sales figures in high gear. A case in point is the fact that Mahindra has overtaken Tata Motors to the number three spot in terms of sales despite the fact that the former doesn’t have a single small car in their portfolio. Practicality seems to be the flavour of the season and will most probably continue as the industry carries over into 2013.

The two wheeler industry has managed to register a growth of only 4.09 per cent in the first three quarters of FY 2012. The driver of growth for the segment interestingly happens to be the scooter segment which posted a growth of 18.44 per cent. Just a few years ago, this very segment was written off and numerous players moved to motorcycles, however so far in FY 2012 motorcycles haven't been faring to well with just a 0.77 per cent growth rate.